Developing A Salient Relationship with Stakeholders

Coffee beans - office stimulant

[We’re pleased to welcome Anabella Davila and Christiane Molina of Tecnologico de Monterrey. Anabella and Christiane recently published an article in Business & Society, entitled “From Silent to Salient Stakeholders: A Study of a Coffee Cooperative and the Dynamic of Social Relationships.”]

A less-bureaucratic, hierarchal relationship, that is based on moral commitment to stakeholders, may benefit long-term understanding and solution of stakeholder claims, according to the article “From Silent to Salient Stakeholders: A Study of Coffee Cooperative and the Dynamic of Social Relationships,” published in the journal Business & Society, coauthored by Anabella Davila, a research professor and the leader of the Strategy and Management in Emerging Economies Research Group at EGADE Business School, Tecnologico de Monterrey, Mexico and Christiane Molina, professor at the Undergraduate School of Business, Tecnologico de Monterrey, Mexico State Campus.

This study of an indigenous coffee farmers’ cooperative association, which was once isolated and then began to compete on the fair-trade global market, notes that the “silence” of stakeholders is the result of an unequal relationship that is not focused on satisfying their needs. Since 1940, the Union of Indigenous Communities of the Isthmus Region (UCIRI, in Spanish), made up of small, independent farmers from the Tehuantepec Isthmus region (state of Oaxaca), had worked in government programs that promoted the coffee industry. However, it was not until they created a formal cooperative association in 1983 that UCIRI started to gain salience as a stakeholder of government agencies and fair-trade organizations.

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The study centers on how interactions and relationships are developed between organizations and stakeholders, especially when the stakeholders come from communities at the periphery of society and economic activity. By analyzing data on the UCIRI’s past evolution, the authors found that the unequal, hierarchal, bureaucratic relationship between government agencies and coffee farmers was less effective for understanding and tending to their demands, including better living conditions. As “silent” individuals, small farmers were invisible in the stakeholder network, but when they became part of a formal group, they took their first steps toward “salience.”

In addition, it was thanks to mediation by the Dutchman Francisco VanderHoff Boersma, who had a strong moral commitment to the development of the communities in the region that UCIRI began to develop links with foreign fair-trade organizations and to move toward this market niche in the 1980s. This collaboration allowed the cooperative to export to Europe and the United States and to work with large distributors.

Thus, the authors stress the importance of individual mediators and a moral commitment when building a strong, lasting relationship that allows the demands of marginalized stakeholders to be satisfied. A less bureaucratic, hierarchal relationship—based on a moral commitment to stakeholders—benefits long-term understanding and stability of the relations between stakeholders and the organization.

Besides gaining “salience” within the coffee industry, the UCIRI members were empowered and earned recognition from authorities, becoming an important actor in the promotion of fair trade in Mexico.

The abstract:

Theoretical and empirical research on stakeholder behavior tends to focus on specific actions or responses in the context of the organization–stakeholder relationship. Despite increased efforts to look beyond the dyadic organization–stakeholder relationship, research still favors the perspective of the focal organization. The taken-for-granted assumption of the organization–stakeholder relationship may limit our understanding of how organization–stakeholder linkages are formed and evolve over time. By adopting the perspective of the stakeholder, this article examines organization–stakeholder relationship formation and tracks changes in the salience of stakeholder groups otherwise considered to be nonstakeholders. This research draws from a case study of small coffee producers in Southern Mexico who formed a cooperative and developed salience within their stakeholder network after a long history of diverse individual, organizational, and institutional arrangements. The findings suggest that the replacement of bureaucratic stakeholder relationships (i.e., those based on inequality, transactions, and hierarchy) with relationships characterized by strong moral commitment to stakeholders’ claims (in this case, the improvement of the community’s economic and social welfare) enabled independent farmers to transform into an integrated, solid, and worldwide competitive group of coffee producers.

You can read “From Silent to Salient Stakeholders: A Study of a Coffee Cooperative and the Dynamic of Social Relationships” from Business & Society free for the next two weeks by clicking here.

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*Coffee image attributed to Lilian Wong (CC)

A Broader Look at Firms’ Corporate Social Performance in 2000-2010

 

10310820984_fb57a27068_z[We’re pleased to welcome Elise Perrault of College of Charleston. Elise recently published an article in Business & Society, entitled “What have firms been doing? Exploring what KLD data report about firms’ corporate social performance (CSP) in the period 2000-2010,” with co-author Michael Quinn of Bentley University.]

With a strong interest for firms’ relationship with stakeholders and, more broadly, society, we constantly read about how firms address – or not – a wide variety of social issues. However, this stream of research generally provides anecdotal evidence or analyzes antecedents and consequences of firms’ involvement in a targeted issue (such as philanthrophy or environmental management, for example). In short, we felt the need for a broad, 30,000 ft, view of how firms generally engage with stakeholders through addressing social issues. At the same time, with the soaring popularity of KLD data in the field, we wanted to gain a more precise appreciation of how this data source pictured firms’ actions in society.

We find our results quite revealing and at times surprising. For instance, the results show that firms are increasingly attending to secondary stakeholders, even while garnering more concerns on primary stakeholder dimensions. This points us to question whether managers are experiencing shifting beliefs regarding the value of BAS CoverCSR; specifically that it represents less a mechanism to attract stakeholder support and more a cornerstone to their risk management approach in terms of how society values the firm’s existence. We also find, as expected, that firms generally nurture strengths in the same dimensions in which they present concerns.

The most surprising finding is the extent to which prior corporate social performance (CSP) in a given dimension is linked to CSP in other dimensions over time. This suggests that as firms engage in CSP, they find rewards that drives them to further invest in yet other dimensions of CSP. As a result, we are led to reconsider the notion of a “virtuous circle” (Waddock & Graves, 1997) and suggest that future research examines in greater depth the real benefits that firms perceive from CSP and the motives that drive their increasing commitment to CSP.

Having provided this broader view of firms’ involvement with stakeholders and social issues, we hope this research will serve as a foundation for future research in several ways. For starters, we note the significance of industry dummies in the analysis. This finding confirms what previous research indicates, that industry matters to CSP strenghts and concerns. However, the extent to which industry affiliation predisposes a population of firms to certain CSP strenghts or concerns remains unaddressed. Pushing further in this direction would be to explore how industry affiliation affects stakeholders’ perceptions, and whether stakeholders are more forgiving or scrutinizing of firms in certain industries, for example.

Another insight from our analyses is the importance of using a long time frame when analyzing firms’ CSP, which has seldom been used in previous research. Doing so would enable researchers to see patterns and connections between various dimensions of CSP, answering questions such as “Do strengths (concerns) on certain dimensions of CSP generally prompt firms to subsequently perform better or worse on these and other dimensions?” While this would shed light on the ways in which firms can be primed to address certin social issues, on a broader scale, these analyses contribute to the conversation debating the fundamental question regarding the purpose of the firm and its obligations to shareholders and stakeholders.

The abstract for the paper:

With the blossoming of research on corporate social performance (CSP), the data produced by Kinder, Lydenberg, Domini (KLD) have become the standard to measure firms’ social and stakeholder actions. However, to date, only a few studies have focused on examining the data directly, and have done so largely in terms of validating the concepts and methods in the data set’s construction. The present study seeks to complement these efforts by contributing knowledge about what the KLD data report on firms’ actions toward primary and secondary stakeholders, and the dimensions of CSP that firms generally engage in, together or sequentially. With data on 3,073 firms over the period 2000-2010, results show that firms expend more resources on garnering strengths in primary stakeholder dimensions, although this trend is sharply deteriorating to the benefit of secondary stakeholders—notably the natural environment. Results also show that firms generally approach CSP with a mixed behavior, with strengths and concerns in the same dimensions, especially as it pertains to secondary stakeholders. These are the same dimensions in which firms show the longer, more intrinsic commitments, suggesting that secondary stakeholder strengths and concerns may be structural in nature. However, there is also evidence of relationships across dimensions, indicating that firms’ involvement in CSP can generate momentum. The rich implications of these findings are discussed.

You can read “What have firms been doing? Exploring what KLD data report about firms’ corporate social performance (CSP) in the period 2000-2010” from Business & Society free for the next two weeks by clicking here. Want to stay current on the latest research published by Business & SocietyClick here to sign up for e-alerts!

Interested in submitting a manuscript to the journal? You can learn more about Business & Society‘s manuscript guidelines by clicking here.

*Conference sponsorship image attributed to Fortune Live Media (CC)

The September 2011 issue of Business & Society is Online

The September 2011 issue of Business & Society (BAS) is now available online here. This issue continues the 50th anniversary celebration volume, which includes a special section of three dissertation abstracts that were the finalists for the best dissertation award of the Social Issues in Management (SIM) Division of the Academy of Management in August 2010. Professor James Mattingly, an associate editor for BAS, and the finalists prepared articles for this section.

The lead article for this issue was published by Roberto Garcia-Castro, Miguel A. Ariño, both of IESE Business School, and Miguel A. Canela, University of Barcelona, entitled “Over the Long Run? Short-Run Impact and Long-Run Consequences of Stakeholder Management.”

The Abstract:

The stakeholder view of the firm has been justified under instrumental and normative bases. Whereas the instrumental basis argues that “enlightened stakeholder management” is a necessary precondition to seek shareholders’ value maximization, the normative basis relies on the observance of ethical norms by managers and the notion that the stakeholders should be treated as “ends.” Some scholars argue that both views actually converge. However, this article provides empirical evidence of the negative effects of stakeholder management in shareholders’ value in the short run and the positive effects over the long run, using a longitudinal database of 658 U.S. firms. Given the difficulties of anticipating the instrumental long-term financial effects of short-run decisions affecting the different stakeholders, the authors’ findings support the view of the normative basis for stakeholder theory based on ethics, norms, and heuristic criteria as a way to solve conflicts among the claims of different stakeholders.

The other articles in this issue can be found here. For more information about Business & Society, please follow this link.

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New Business & Society Issue is Available

Business & Society‘s September 2011 issue is now available online! To view the Table of Contents, please click here.

Roberto Garcia-Castro, Miguel A. Ariño, both of IESE Business School, and Miguel A. Canela, University of Barcelona, published “Over the Long-Run? Short-Run Impact and Long-Run Consequences of Stakeholder Management” in this new issue of Business & Society.

The abstract:

The stakeholder view of the firm has been justified under instrumental and normative bases. Whereas the instrumental basis argues that “enlightened stakeholder management” is a necessary precondition to seek shareholders’ value maximization, the normative basis relies on the observance of ethical norms by managers and the notion that the stakeholders should be treated as “ends.” Some scholars argue that both views actually converge. However, this article provides empirical evidence of the negative effects of stakeholder management in shareholders’ value in the short run and the positive effects over the long run, using a longitudinal database of 658 U.S. firms. Given the difficulties of anticipating the instrumental long-term financial effects of short-run decisions affecting the different stakeholders, the authors’ findings support the view of the normative basis for stakeholder theory based on ethics, norms, and heuristic criteria as a way to solve conflicts among the claims of different stakeholders.

To view other articles in this issue, please follow this link.

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